Europe Banks Eye Cross-Border Deals

LONDON - Lloyds TSB Group PLC and Deutsche Bank AG are likely to lead banking companies in acquisitions and alliances in Europe next year, as European companies seek to boost revenues and cut costs amid stiffening competition and slowing economies, according to analysts.

London-based Lloyds has made a $27 billion takeover bid for Abbey National PLC, Britain's No. 2 mortgage lender. Meanwhile, Deutsche is looking to expand in fund management and investment banking. Smaller banking companies, such as Germany's Commerzbank AG, also are considering purchases.

Deutsche Bank and other German banks are seeking acquisition opportunities outside Germany, where government-subsidized banks are making it tough for private companies to turn a profit in consumer banking.

British banking companies and their Continental counterparts are also being forced to find ways to compete with rivals selling products more cheaply over the Internet.

Laurie Magnus, a banker in the financial institutions group at Credit Suisse First Boston, said banking companies that have already combined with rivals in their own country will increasingly look to grow through purchases or alliances across borders. Cross-border transactions are also a way to bolster investment banking income, she said.

"The driving force is the prospect of enhanced earnings, a global brand and scale," Ms. Magnus said. "The dream ticket is to have a pan-European brand which has retail operations in every national market in Europe."

But getting the deals done has proven difficult in Europe.

Deutsche and Dresdner Bank AG called off a $29 billion merger in April after the companies disagreed over the future of Dresdner's investment bank. Dresdner's subsequent merger talks with Commerzbank broke down in July.

About $128 billion of European banking acquisitions were announced this year, a 44.1% decrease from last year. One of the largest transactions that closed this year was Royal Bank of Scotland Group PLC's $35.2 billion purchase in March of National Westminster Bank PLC of London.

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